I took part in an exchange of views in City AM this morning under the title Is Sir Martin Sorrell right that corporation tax payments are a “question of judgement”?

Steve Barclay, the Conservative MP for North East Cambridgeshire and a member of the Public Accounts Committee, said he was. I disagreed, sating:

I disagree with Sir Martin Sorrell’s claim, which is based on the perception that capital can locate where it wishes and can move at will. Three things perpetuate this myth. The first is that tax havens (and low-tax jurisdictions), whose opacity allows much of the supposed mobility of capital, obscure the reality that often nothing moves bar the ink on a contract. The second is a financial sector that promotes and services this myth. The third is that tax authorities are unwilling – as the Public Accounts Committee has suggested – to tackle tax avoidance. Multinational companies cannot make money without engaging customers, staff, and by employing assets. Paying tax in the right place at the right time is not a moral obligation. The right place is where the customers, staff and assets are. The right time is when the law of the land dictates. It is not “a matter of judgment”; it is a legal obligation.

I'm not sure how, candidly, anyone, least of all an MP, could disagree especially given Sorrell's justification, noted in the Guardian:

Sorrell said the tax structures deployed by Starbucks, far from being exotic, were accepted practice for multinational firms.

"You can have a procurement department in an offshore base; you can have a brand operation in an offshore base. And the criticism of some companies – Google is an example, Starbucks and Amazon – have done just that. Companies even based in the UK can do that."

All of which, as I noted above, is just playing a game of make-believe behind a veil of secrecy to relocate profits for tax. And as for the fact that this is no moral judgement, but a legal obligation that is being avoided the Guardian also note

Asked how the rules should be improved to ensure multinationals delivered a fair contribution to local exchequers, Sorrell said:

"I hate the term 'corporate social responsibility' but all of those contributions you make ... are a question of judgment. There are the rules, if then companies choose just as they chose ... to make a contribution to all the stakeholders on a long-term basis all credit to them."

6 Responses

I think we should give Sorrell credit for honesty here. What he is saying is that the system devised by parliament and implemented by HMRC is one which gives multinational companies choice over whether they pay taxes, a choice denied to workers and small businesses. The real question is, is Steve Barclay happy with this and if so, why does he want to make war on British businesses (I thought Tories did patriotism, but I must be out of date).

Clearly though Sorrell and Barclay are correct in their assessment of the system. In that respect they agree with you. They probably disagree in that you (and I) would like the system changed. They may well be happy with it.

[…] business: they increase it. What they make clear is that tax is not a matter for their judgement, as Martin Sorrell would wish, but is a matter of complying with the law. In that case what India is actually indicating is that […]

“Staffordshire billionaire John Caudwell has called on customers to boycott companies which don’t pay enough tax.

The Potteries-raised philanthropist, who sold his Phones 4U company for £1.5bn in 2006, says businesses have a duty to help bankroll the British economy – particularly at a time when ordinary families are having to tighten their belts.”…

“In an interview with The Sunday Times this week, Mr Caudwell hinted that he hadn’t always been a keen taxpayer.

He said: “As a businessman, I’ll admit that in the early days I did things that I probably wouldn’t do now. I needed my business to grow – and that included tax planning.

“But there came a point when that didn’t feel right. How can you preach about what’s right for society and then not pay your whack to The Chancellor?” ”

I looked a little deeper into John Cauldwell’s past views on tax avoidance; I suspect that he is hoping his pronouncements make for good PR, which in itself could be seen as a small victory for we who are highlighting and campaigning against tax avoidance. While I feel that such small achievements and victories should be recognised, the underlying situation must be changed.